Correlation Between GM and Hartford Moderate

Can any of the company-specific risk be diversified away by investing in both GM and Hartford Moderate at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GM and Hartford Moderate into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and Hartford Moderate Allocation, you can compare the effects of market volatilities on GM and Hartford Moderate and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GM with a short position of Hartford Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Hartford Moderate.

Diversification Opportunities for GM and Hartford Moderate

-0.38

Correlation Coefficient

GM  Hartford Moderate

Very good diversification

The 3 months correlation between GM and Hartford is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Hartford Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Moderate and GM is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on General Motors are associated (or correlated) with Hartford Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Moderate has no effect on the direction of GM i.e., GM and Hartford Moderate go up and down completely randomly.

Pair Corralation between GM and Hartford Moderate

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Hartford Moderate. In addition to that, GM is 4.37 times more volatile than Hartford Moderate Allocation. It trades about -0.01 of its total potential returns per unit of risk. Hartford Moderate Allocation is currently generating about 0.03 per unit of volatility. If you would invest  1,254  in Hartford Moderate Allocation on December 19, 2024 and sell it today you would earn a total of  13.00  from holding Hartford Moderate Allocation or generate 1.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

General Motors  vs.  Hartford Moderate Allocation

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Hartford Moderate

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Moderate Allocation are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Hartford Moderate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Hartford Moderate

The main advantage of trading using opposite GM and Hartford Moderate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Hartford Moderate can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hartford Moderate will offset losses from the drop in Hartford Moderate's long position.

The idea behind General Motors and Hartford Moderate Allocation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.